QNI Metals Pty Ltd & QNI Resources Pty Ltd v Chief Executive, Department of Natural Resources and Mines

LAND COURT

BRISBANE

8 MARCH 2002

Re: V2001/0114

An Appeal against an Unimproved Valuation
Valuation of Land Act 1944
Local Government: Thuringowa

QNI Metals Pty Ltd and QNI Resources Pty Ltd
v.

Chief Executive, Department of Natural Resources and Mines

JUDGMENT

The subject land is to be found in a coastal area located about 25 km north of Townsville known as Yabulu. It comprises a total area of 2,125.5 ha comprising an aggregation of 11 freehold lots, together with a Permit to Occupy granted under the provisions of Land Act 1994. The total freehold area is 2,124 ha, whilst the Permit to Occupy is said by the respondent to cover an area of 1.5 ha. The land is used as a nickel processing plant in association with a small power station. In a valuation report provided by Denis Arthur Schy, a registered valuer in the employ of the respondent, he said that about 750 ha is applied to the processing use, whilst the balance comprises a buffer area separating the processing plant from residential areas; areas available for future utilisation as part of the plant; and an area of coastal swales, dunes and mangrove swamps along the coast which, for environmental reasons, would not be available for use as part of the processing plant. In a valuation report provided by Craig Stack, a registered valuer called by the appellant, he said that this coastal area covered 200 to 250 ha.
The processing plant was first developed in 1975 following the enactment of the Queensland Nickel Agreement Act 1970 which accorded certain benefits to the owner of the enterprise on the subject land. The plant initially received ore from the Greenvale Nickel Mine located some distance inland, with a rail link providing for the transportation of ore. That mine ceased operation in about 1994, as I understand, and since then the processing plant has continued operation by taking ore from other sources.
Pursuant to the provisions of the Valuation of Land Act 1944 the Chief Executive applied a value to the subject land aggregation of $4,235,000. The relevant valuation date is 1 October 1999. In its appeal the landholder provided an estimate of the unimproved value of the land in the amount of $1,012,250, however through Mr Stack led evidence to a figure of $1,225,000. The grounds of appeal are sufficiently broad to encompass the issues raised in the evidence. The issue of primary importance is the question of the highest and best use of the subject land (Adelaide Clinic Holdings Pty Ltd v. Minister for Water Resources (1988) 65 LGRA 410 at 415)
In his valuation report Mr Schy said "the highest and best use is considered to be as presently used". He explained this to be either as a nickel processing plant or some other single use industrial complex such as a power station or suchlike. Mr Stack concluded that the highest and best use of the subject land was as rural homesites and for rural pursuits: the difference of opinion between the valuers erecting the major difference between them.
Evidence was called by the appellant from Ross Geoffrey Muller, a project manager employed by the appellant group of companies (which I will refer to generally as QNI). Mr Muller is a qualified chemical engineer and is experienced in carrying out feasibility studies for the establishment of refineries similar to that established at Yabulu, that experience being gained in New Caledonia, Indonesia and the Philippines. Mr Muller expressed the view that "if Queensland Nickel were looking to establish a similar refinery in October 1999 or indeed today, it would not establish that refinery in Townsville but would instead establish the refinery in close proximity to its source of nickel ore".
Since the cessation of ore supply from the Greenvale Mine in 1994, ore has been received by the refinery from New Caledonia. It is also intended that an "intermediate mixed hydroxide product" be taken from a new mine in Western Australia. It is with these sources of ore in mind that Mr Muller provided his opinion. He said that an option, apart from the location of a processing plant near the ore body, would be to locate at Gladstone. There was no evidence of a source of ore a similar distance from Yabulu as was the Greenvale Mine.
At the relevant date for valuation purposes it would cost in round terms about $2 billion to replace a processing plant of the type on the subject land. To the extent, therefore, that ore may be obtained to supply the processing plant, there is a commercial benefit it continuing to utilise the various structures on the subject land which make up the processing plant. The structures on the subject land therefore add value to the land for the purpose of the land continuing to be used as a nickel processing plant. In these circumstances, then, the structures would be considered as improvements under the provisions of the Valuation of Land Act and applicable case law (see paras [14] and [15]) and the land would be "improved land" in terms of s.3(1)(b) of this Act. That provision requires the unimproved value of the land to be determined on the basis that "the improvements did not exist".
The appellant is currently undertaking feasibility studies with the view to upgrading the plant at a cost estimated to be $320,000,000 to $340,000,000. It is intended that the upgraded plant would be commissioned in late 2005. The sense of a commercial decision to upgrade the Yabulu plant was not disputed, however in the present context, I observe that the decision was taken on the basis that the subject property is presently improved as a nickel processing plant. If I notionally remove the structures on the subject land on the basis, which is common between the parties, that they add value to the land for its use as a nickel processing plant, then a quite different commercial decision would arise. A commercial entity posed with the question as to whether to establish a nickel processing plant at Yabulu would, on the basis of Mr Muller's evidence, decide against applying the land to that use. There was no evidence of similar expertise to Mr Muller's offered by the respondent, nor did cross-examination of him reveal to me that his opinion was without foundation or was irrational. Mr Schy expressed the view that political stability and living standards in Australia were relevant considerations to be taken into account in considering the viability of the subject land as a site for a nickel processing plant, however these propositions were not put to Mr Muller. Nevertheless it seems to me that Mr Muller's opinion concerning the unsuitability of the subject land was expressed in sufficiently broad terms to indicate that the conclusion was based on the consideration of all relevant criteria.
It follows that I conclude that the highest and best use of the subject land, viewed devoid of improvements, is not that of a nickel processing plant.
Evidence in the form of two valuations produced under subpoena indicated that the appellant had valued the subject land at figures which might be said to broadly support the level of value applied by Mr Schy. One valuation was dated May 1995 and valued land, which included the subject land, at $5,800,000, whilst another dated 13 June 1998 applied a value of $7,400,000. The land considered by the valuer on each of those occasions included land other than the subject land, so it is not possible to directly compare those figures with Mr Schy's opinion of value. Notwithstanding that, the suggestion from the respondent is that the level of values indicated would provide comfort to me in concluding in favour of Mr Schy's valuation.
I cannot draw that conclusion. I have studied the two valuation reports and find that the basis of valuing the land is quite different from that in the matter before me. In each of those valuations the valuer proceeded on the basis of valuing the land as if the existing use were the highest and best use. The valuations reveal no evidence of an inquiry being undertaken by the valuer as to what the value of the lands would have been had they been presented devoid of structures. Reliance, therefore, cannot be placed on those valuations either in terms of considering the values revealed or in terms of any suggestion that those valuations support the highest and best use relied upon by the respondent in this matter.
I will now consider the question as to whether some other single use industrial complex such as a power station might be the highest and best use of the subject land: an alternative highest and best use suggested by Mr Schy. In pursuing this issue, there are two difficulties which confront a conclusion in favour of the respondent. First, there is the notion of "worsement" and second is the question of whether there is a market for the type of use proposed. I will deal with these issues in sequence.
In his written statement, Mr Muller said, "I am familiar with the infrastructure located in the refinery and can say that if the Respondent (sic) was to abandon the site, the refinery infrastructure could not be used for any other purpose than the refining of nickel ore and associated products." Whilst it may be the case that general purpose structures, such as sheds, could be adapted to uses other than that of nickel processing, the expert evidence of Mr Muller leads me to a conclusion that whilst the structures on the subject land are improvements for the purpose of processing nickel, they are not generally improvements for the purpose of other uses. Mr Schy conceded as much. Whilst I employ the term "structures", this also refers to such works as tailing dams.
The notion of what improvements are is dealt with in s.6 of the Valuation of Land Act, however, that provision proceeds on the basis that the question of whether something is an improvement or not turns to some extent on a general understanding. That understanding was, however, given sharper focus by the High Court in Brisbane City Council v. The Valuer-General (1978) 5 QLCR 283 in the leading judgment of Gibbs CJ at 296-297:
"In the first place, an improvement in relation to land must be 'thereon or appertaining thereto'. This means that the improvements, if not on the land, must be 'such as are in the strict legal sense 'appurtenant' to the property and incident to its ownership': McDonald v Deputy Federal Commissioner of Land Tax (N.S.W.). (1915) 20 C.L.R. 231, at pp. 234-235. Secondly, something done on or appertaining to land which reduces rather than enhances its value is not an improvement for the purposes of the Act, any more than it would be in the ordinary sense of the word. In Morrison v. Federal Commissioner of Land Tax, (1914) 17 C.L.R. 498, at p.503, Griffith C.J. said, in a passage which has frequently been cited:
'Any operation of man on land which has the effect of enhancing its value comes within the definition of "improvement".'"

Now there are other works of man referred to by the Chief Justice that may not add value to a parcel of land or which by the effluxion of time and usage become transformed from being improvements to becoming a disability. The requirement in s.3(1)(b) of the Valuation of Land Act that improvements be assumed not to exist does not extend to such works of man which have been described in the cases as "worsement" (See for example Marano v. The Valuer-General (1978) 5 QLCR 194). There will, therefore, be instances where the correct valuation approach is not to value the land in its natural state, but to value the land as if improvements did not exist but with any works of a man that do not add value to the land remaining in place.
The evidence before me is that the structures on the subject land could not be utilised as part of any use other than that of a nickel processing plant. If the land was to be put to a large single industrial use the structures would be surplus to requirements. They would therefore need to be removed so that the subject land, as a whole, could become available for use. The respondent has not adduced evidence to show the cost of removal of the structures nor the expected scrap value, if any, of the structures once removed. In circumstances such as the present where the structures, prima facie, constitute worsement, a burden rests on the respondent to show that the cost of addressing the worsement is such that the suggested highest and best use remains viable. The respondent has not done that in this case. It appears that Mr Schy has simply proceeded on the basis that the highest and best use of the subject land would be available if the nickel processing plant structures were not there. It may be open in some cases to show that the selected highest and best use could co-exist with the structure causing worsement and that it would be prudent to use the land in that manner rather than to go to the expense of remediating the worsement. In such a case the worsement would not affect the identification of the highest and best use, but would reduce the value of the land for that highest and best use. The respondent did not elect to proceed in this manner. The respondent sought to place reliance on MEQ Nickel Pty Ltd and Greenvale Nickel Incorporated v. The Valuer-General (1988) 12 QLCR 25 to the effect, as I understand the submission, that any valuation prepared on the basis of a use other than as a nickel processing plan should disregard the structures on the subject land. I can find no support for that contention in the report of this case.
I cannot, therefore, draw a conclusion in favour of the respondent's view of the highest and best use of the subject land. Given this, there is no need for me to consider the second difficulty mentioned in para [12], however some observations concerning whether a market existed for such a use may be worthwhile.
The State Government, together with Townsville City Council, initiated a project to identify land suited to single large industrial use in order that the prospects of applying land to such uses near Townsville might be promoted amongst potential users. The Townsville Industrial Land Project (TILP) concluded that the Yabulu area included land that was suited to such industrial development. Yabulu was third on a list of suitable areas, the first-ranked of which was Woodstock, then Rocky Springs and, last on the list, Herveys Range. Whilst the State Government was a co-sponsor of the TILP when Woodstock was identified as the first choice area, the State withdrew support for Woodstock shortly prior to the last State election. Reasons for that withdrawal of support were not made clear to me. Notwithstanding the State's change of position, the Townsville City Council has gone ahead with a bid for land in the Woodstock area. This is discussed further below at para [20].
Large areas of land were designated in each of the areas identified in TILP. It is obvious that the total area of land identified in each location would not be able to be developed for single use industrial purposes in the foreseeable future. In other words, the identification through TILP of suitable lands would not grant to that land a highest and best use as a single industrial site. The emergence of such a highest and best use would be dependent on a proposal of such a use emerging from the marketplace and identifying a particular site. Until so identified, sites would remain, in my view, as having the highest and best use that would otherwise apply to the land. Thus, for example, a parcel of land that might be suited to the purposes of grazing cattle would have that highest and best use until identified as being the preferred site for an industrial application. I was presented with no evidence which would lead me to a different conclusion. It may be that owners of parcels of land included in the identified areas in the TILP Report would attempt to sell at a price which took into account the potential for future industrial uses, however, I cannot conclude that a prudent purchaser would pay any more for the land than, for example, its grazing use simply because there is a prospect of the land becoming attractive to a party intent on developing a large industrial facility. The relative rarity in the marketplace of purchasers wishing to develop large single industrial uses is such that a vendor would not anticipate such a purchaser selecting his land for that use in the immediate future. The only such uses mentioned in evidence as being in the Townsville area included a copper refinery, a zinc refinery, a meatworks and the subject processing plant. I am aware that the subject plant was developed about 25 years before the valuation date and that the copper refinery was in place prior to that. Assuming the other large plants to have been developed within the past 25 years, it is clearly the case that the identification of such a user in the market at any point in time would be a notable event. It may be that in the fullness of time such an industrial user might emerge to purchase a particular parcel of land, however the uncertainty of the delay period is such that the potential, such as it is, would properly be characterised as being so uncertain as to be remote.
There was evidence of Townsville City Council having made a bid for a site owned by CSIRO in the Woodstock area during 2001, but not on the basis of having a particular client or use in mind. Rather, the Council was apparently intent on securing a site in order that it might be promoted in such a way that would attract an industrial user. I do not accept the interest of the Townsville City Council in the Woodstock land as indicating a demand for industrial land, but rather an attempt by the Council to attract an industrial user. The Mayor is quoted as saying that the site would be "suitable … for a base load power station, secondary minerals processing of copper, zinc and nickel and a holding area for livestock export". Mr Stack described this as a "wish list". Certainly there is no evidence of prospective purchasers in the form of end users being in the market for properties such as the subject land at the relevant valuation date. Apart from an option being entered into with respect to a 700-odd ha site with a view to a power station being developed in conjunction with the proposed Papua New Guinea gas pipeline, no other potential purchasers were identified by the respondent. I note in passing that the proposed power station has not yet proceeded.
Even if the Townsville City Council might be described as a land banker hoping to attract industrial users, there is nothing to say that the Council would pay more than a price arrived at based on the non-industrial use of land.
Mr Schy suggested that once a base load power station comes to Townsville, large industrial uses, such as a lead refinery, should follow. He said that expressions of interest for such a power station had recently been called. He noted the port expansion at Townsville had resulted in the port there becoming the third largest in Queensland and suggested that this, together with the base load power station, would unleash a range of large single industrial projects. That may be the case, however, the subject land needs to be valued as at 1 October 1999 on the basis of the market evidence at that time, not on what might be expected in the fullness of time.
I conclude on the evidence presented to me that there is no market for lands such as the subject as a large single use industrial site and that even if such a market existed, there is no evidence that amongst all of the land suited to such development the subject land would be a preferred site.
In his valuation Mr Stack addressed what he had identified as the range of uses commonly found on land with the characteristics of the subject. He considered a large single industrial use as discussed earlier and rejected that, then turned to the option of the land being disposed of for general industrial uses. In this regard he said:
"The market for industrial lands of all zoning types (light industry, general industry, noxious, and hazardous industry) has been moderate in recent years.
A perceived over supply of industrial sites below 4,000 square metres of site area, has retarded further development of industrial lands. The market for smaller industrial parcels is generally dominated by two developers/builders in the Townsville region and both are creating parcels to suit potential tenants from existing englobo land stocks.
The market for specific industrial sites, 1 hectare to 50 hectares in land area, is also only moderate. Sales in this market are generally dependent upon the income opportunities associated with the properties.
Sales of large industrial sites (above 50 hectares) have been scarce in recent years and a full summary of sales in excess of 50 hectares is shown in the sales evidence.
There are currently only small areas of industrial lands within the Twin Cities region which are specifically zoned 'Noxious and Hazardous Industry'. It is evident from sales activity that demand for these sites is no better than demand for general industrial lands."

Mr Schy included a sale (Sale 5) in his valuation, which Mr Stack identified as being purchased for the purpose of an industrial subdivision. I accept his evidence that the sale is located within the existing industrial corridor of Townsville, whist the subject land suffers in being located some 25 km away. I accept Mr Stack's conclusion that the subject land does not reveal the highest and best use of subdivision and disposal for general industrial uses.
Mr Stack also considered and rejected use of the subject land as a grazing property and for such specialised uses as aquaculture and tourist/short-term accommodation. I accept his opinion on these matters.
By process of exclusion Mr Stack settled on rural homesites and rural pursuits as being the most probable use of the subject land. He was not strenuously challenged in regard to that conclusion. Indeed, in his valuation Mr Schy said:
"As an alternative use, the area would suit further subdivision into not only residential and rural residential lots, but also into more intense farming lands which could utilize the 8638 megalitres of water available at no cost to the owners of the site."

I recognise that this alternative use is different from the highest and best use settled upon by Mr Stack, however it has some similarities. Mr Schy included a sale (Sale 4) which he said could be used to compare with the subject land for an alternative use of "rural pursuits". In his view the comparison of that sale with the subject property would need to take into account what he understood to be the rights of the subject property to 8,638 megalitres of water, though he did not take that comparison through to a conclusion. It will be useful if I first dispose of the issue of water raised by Mr Schy before proceeding further with Mr Stack's valuation.
The Queensland Nickel Agreement 1970 was made pursuant to the Queensland Nickel Agreement Act of that same year – the statute which enshrines the rights and obligations of the owner of the processing plant on the one hand and the State Government on the other. Clause 5(1) of that Agreement relevantly provides:
" Subject to subclause (2) of this clause the Companies shall have the right to sink bores and wells and to obtain water from all sub-surface sources in the said catchment areas for their Treatment Plant near Townsville up to a maximum annual quantity of 8638 megalitres and at a maximum rate of 24 megalitres per day. The right to sink bores and wells and to obtain water from sub-surface sources relates to the whole of the said catchment areas and is not confined to any particular location."

Pursuant to that clause, water licences have been granted to QNI under the Water Resources Act 1993. These licences include 64 sub-artesian bore licences. The evidence indicates that around 26 to 30 of these licences are for production bores in the well field adjacent to the Black and Alice Rivers. In addition to these bores there are others which are located near the refinery itself. The balance, it would appear, are for planned expansion of the well field.
QNI owns two parcels of land in the well field (Lot 6 on RP 737089 and Lot 7 on RP 737090) upon which it has located licensed bores. Water harvested from the well field and as supplemented from the Black River is delivered to the subject land via a 15 km pipeline constructed on the Permit to Occupy mentioned earlier.
The bores near the refinery yielded 394 megalitres of water during the calendar year 1999. The operational bores in the well field may be supplemented by water taken from the Black River via two surface water pump licences which yielded 617 megalitres in total in 1999. Other water (2,033 megalitres) came from the Mt Spec pipeline, but by far the largest component of the 1999 yield came from the well field. A total of 5,188 megalitres came from that source. Mr Schy expressed the view that the 8,636 megalitres of water per annum available free of charge to the subject land would be an advantage to the land if it were put to use as "intense farming lands". There was, however, no evidence provided as to the suitability of the subject land for irrigated farming, nor of similar country in that area being put to that use. It is difficult to conclude, therefore, that such a use would be part of the highest and best use even if the volume of 8,638 megalitres of water per annum was properly to be considered as being available to the subject land for the purpose of its valuation. The critical initial question for me to consider, however, is the treatment of that free water in the statutory valuation process.
The respondent relied on the case of Chief Executive, Department of Lands v. Webster (1995) 15 QLCR 394 as authorising the inclusion of the water rights that attach to the subject land as part of the unimproved land and, therefore, to be considered as part of the unimproved value. In Webster's case the question before the Court of Appeal was whether a waterworks licence granted under the Water Resources Act 1993 was to be considered as part of the unimproved value for the purposes of the Valuation of Land Act. At 402 in the joint judgments of Davies JA and Thomas J, their Honours said:
" It is true that a waterworks licence is a complex hybrid, and that it does not come to the land naturally. However such a licence cannot be regarded as a personal benefit. It is primarily concerned with the land on which it can be used rather than with the person of the registered owner. It is not a transitory benefit and in our view once the land gets such a benefit it should be regarded as a feature to be taken into account when an assessment is made of the unimproved value of the land. It may also be noted that the terms of ss.11(1)(viii) and 13(2)(e) are consistent with the view that such a licence should be brought to account as part of the unimproved value."

In the matter before me the right to the water granted in Clause 5 of the Queensland Nickel Agreement is subject to Clause 9(b):

" If at any time during the term of this Agreement –
(b) the Companies shall cease operations at their Treatment Plant near Townsville then the rights to water granted to the Companies in the said catchment areas pursuant to clause 5 of this Part shall cease and any bore or well constructed by the Companies in the said catchment areas shall vest in the Commissioner absolutely without payment of any compensation and the Commissioner shall be at liberty to allocate the quantities of water derived therefrom amongst other users."

Clause 9 supplies an additional legal feature not applicable under the Water Resources Act as such and, therefore, was not part of the reasoning applied by the Court of Appeal in Webster's case. The effect of Clause 9 is that any licence would be considered to form part of the unimproved value of the subject land whilst the treatment plant is operational, but not when operations cease. It is but a small step in reasoning to conclude that Clause 9 should be considered to take effect in circumstances where the highest and best use of the subject land is for a use other than the continuation of the treatment plant. To conclude otherwise would be to create a logical absurdity, in my view. The correct task is to assume QNI to be the vendor of the subject land to a purchaser who would be intent on devoting the land to a use other than the continuation of the operation of the treatment plant. In such circumstances QNI does not have any water licences to offer for sale. A purchaser would not, therefore, place any value on them. It would be quite different if QNI were assumed to be selling the land to be used as a nickel processing plant in which processing would be assumed to continue.
Now the notional disregard of the water licences does not mean that the water in the aquifer is assumed not to exist. It is still there. A purchaser of the subject land for rural homesite uses or purchasers of individual lots may approach the appropriate government agency with the view to obtaining a licence to access that water for rural homesite uses. That opportunity therefore gives a value to the land and it is something that should be taken into account in valuing it. Mr Stack's evidence is that in this respect the sales he relied on are similar to the subject parcels of land, therefore this feature is accounted for. This is apparent from a perusal of the sales evidence included in his valuation report.
I note the evidence from a report provided by Ian Boyce, the Senior Technical Officer (Groundwater Hydrology), Department of Natural Resources and Mines, Townsville, that groundwater management in the Black and Alice River areas has been a contentious issue. Should the QNI water allocation become available for re-allocation on an assumed cessation of the operation of the processing plant, landowners in the Black River area might be expected to put forward a strong case for that water to be allocated to them. In favour of such an outcome resulting would be the fact that they are proximate to the well fields, whilst the subject land is some 15 km away. In addition, I have Mr Stack's opinion that the Black River area contains land of higher fertility than on the subject property. Nevertheless, I doubt that rural homesite lots in the area of the subject property would be denied access to water sufficient for domestic purposes. I now return to my consideration of Mr Stack's evidence on the question of the highest and best use of the subject land.
Mt Stack concluded that demand for the subject property as an in globo parcel designed for subdivision into rural residential sites would not be sufficient to underwrite such a highest and best use. He observed that the market for such small rural residential sites was quite weak in the area. Whilst during the period 1992 to 1993 sales averaged around 250 such sites each year, the volume had reduced to 128 sales during 1999, then moved down to 92 in the year 2000. He concluded that there was limited depth to the market and therefore an apparent need for an extended selling period for the subject land were it devoted to subdivision for such a use. He therefore rejected that highest and best use, a rejection that I accept.
Mr Stack therefore considered the sale of the subject land in its current configuration with the larger parcel, which comprises the central processing site (Lots 1, 2 and 3 on RP 726908 comprising 1,796.34 ha), being sold for rural uses and with rural homesite uses applying to the balance. He also proceeded on the basis that Lots 2 and 3 on RP 725940 comprising a total of 37.33 ha would be considered for sale as a single site. These lots comprised low-lying salt affected lands which adjoin and which would not attract a higher price if sold individually, in his view.
It may be useful if I provide a table showing the parcels that he identified as saleable, their size and the value he applied to each.
Lot 1 PER 201930  1.5 ha  $5,000
             (Permit to Occupy)
           Lot 165 EP 1308  0.256 ha  $22,500
           Lot 4 RP 704282  1.9 ha  $22,500
           Lot 1 RP 722352  11.67 ha  $7,500
           Lots 2 and 3 RP 725940  37.33 ha  $7,500
           Lot 2 RP 725941  58.5 ha  $110,000
           Lot 1 RP 726771  100.4 ha  $167,500
           Lots 1, 2 and 3 RP 726908                 1796.34 ha  $850,000
           Lot 2 RP 732796  118.1 ha  $225,000

Mr Stack reasoned that the sale of these nine parcels would be to a purchaser who would, in due course, sell off the individual parcels. In these perceived circumstances he allowed a discount on the aggregate values of the individual parcels. This issue arises for consideration later.
I will first consider the valuation of the larger parcel of 1,796.34 ha. In valuing this property Mr Stack utilised three sales (Sales 10, 11 and 12). Whilst he said that Sale 10 was superior to the subject lot and Sale 11 comparable to inferior, he had not in fact inspected these sales. The source of his stated opinions was not made known to me. Quite clearly, I cannot accept these opinions, therefore can make no use of those two sales.
Sale 12 took place in April 1995 and involved the sale of a property of 9,176 ha for $1,350,000. In his original valuation Mr Stack had included the sale at an area of 7,617 ha (that is $177 per ha), however, following further investigation, discovered that the correct area was 9,176 ha (that is $147 per ha). He did not analyse the sale to reveal an unimproved value, however agreed during cross-examination that a deduction of $225,000 for improvements on the land would yield an unimproved figure of $123 per ha. Mr Stack was aware that there was fencing, a dwelling, a shed and other improvements on the sale land and had not, as I understand it, formed any view as to the value of these improvements.
Mr Stack's Sale 12 is directly west of the Ross River Dam, which is about 13 km from Townsville, therefore is a little closer than the subject Lots 1 and 3 are to the Townsville CBD. In comparison with his Sale 12 and in consideration of his understanding of the attributes of Sales 10 and 11, Mr Stack adopted a value of $850,000 for the subject lots, a figure which calculates to about $473 per ha. That figure is closer to the price paid for his Sale 11 (at $417 per ha) than to Sale 12, however it is Sale 12 only upon which I can rely. He said that Sale 12 is superior to Lots 1 and 3 but that it analyses to a lower rate per ha owing to its larger size.
The value of $850,000 for Lots 1 and 3 does not take into account the probable worsement associated with the need to remove the nickel processing plant, together with remediation of any possible contamination and the unsightly presence of tailing dams and suchlike. Nor does it take into account the probable reduction in the production capacity of the subject lots because of the area of the lots impacted by these various structures. In his view then, Mr Stack's value of Lots 1 and 3 would be the maximum for the site. On the evidence that I have taken into account, I cannot conclude that a value of $850,000 is too low for Lots 1 and 3, therefore will accept it.
Of the balance of the nine parcels Mr Stack applied nominal values to five. I will come to those in due course, but will first of all consider the other parcels. In his valuation of these Mr Stack utilised the "site value" method whereby the value of the land takes into account the various attributes of the land, however, size is a factor of minimal significance. In valuing these Mr Stack relied on six sales, which he grouped into rural homesites 10 ha to 100 ha and rural homesites 100 ha to 1,000 ha. I will consider the group 10 ha to 100 ha first of all.
He employed four sales (Sales 3, 4, 5 and 6) in valuing the subject lots that fell into this category. Sale 3 had an area of 41.73 ha and sold for $135,000; Sale 4 had an area of 41.7 ha and sold for $130,000; Sale 5 had an area of 48.61 ha and sold for $80,000; and Sale 6 had an area of 40.06 ha and sold for $250,000.
These sale prices include some improvements. Again Mr Stack did not analyse the sales to reveal an unimproved price. He ought to have done that, given the provisions of the Valuation of Land Act, which require me to determine unimproved value. It was put to him under cross-examination that each of the sales had a water bore, fencing and clearing. He accepted that this was so, excepting for Sale 6 which he understood did not have a bore, but then added that he had not inspected that sale property since the early 1990's. I observe that the sale took place in 1999. Figures were put to him as to the value of improvements on each of the sales: Sale 3 $15,000, Sale 4 $10,000, Sale 5 $10,000 and Sale 6 $15,000. Mr Stack did not accept these figures but thought them to be broadly appropriate. Mr Schy was not asked to substantiate the figures, nor even whether he was the source of them.
If I assume a deduction in the value of improvements broadly in the order of those figures put to Mr Stack, the comparison of Sales 3 to 6 with the relevant subject lots remains valid, though the level of value that would result would be correspondingly lower. Nevertheless, no adjustment was sought by the appellant.
Sale 5 in Mr Stack's list of sales was at a price substantially lower than Sales 3, 4 and 6. It was suggested by the respondent in cross-examination that this sale was therefore probably out of line, however, Mr Stack expressed the view that the presence of a powerline easement on that property may have been the reason for the reduced price.
Mr Stack included three sales in his 100 ha to 1,000 ha rural homesite classification (Sales 7, 8 and 9). One of these (Sale 8) was not inspected by him, therefore I reject it as valuation evidence. He viewed Sales 7 and 9 from the roadway, however did know Sale 7 from a previous inspection. Given that Sale 7 had an area of 259 ha and Sale 9 that of 398.8 ha, I would have thought that an inspection from the road would have been not entirely suitable for the purpose of carrying out a valuation.
Sale 7 sold for $220,000, whilst Sale 9 fetched $265,000. Each of these sales had been improved, but again Mr Stack made no deduction for the value of improvements. He said in so far as clearing is concerned that some of the land in the sales is low lying and therefore, I assume, would carry little vegetation. However, that explanation did not suitably dispose of the issue of the sales not having been analysed to an unimproved figure.
In his valuation report no direct comparisons were made between his sale properties and those subject lots other than Lots 1 and 3 (the large processing plant site) discussed earlier. He was not, however, taken to task in this regard during cross-examination, nor was Mr Schy invited to draw different conclusions.
Mr Stack applied nominal values to five parcels of land in the subject property. He formed the view that either because of the small area or because the land was low-lying and salt-affected he could not be confident that the land could be devoted to a rural homesite use. This led him to employ nominal values.
The Permit to Occupy was one of those small area sites and Mr Stack applied a value of $5,000 to it. He had not inspected the Permit to Occupy and seemed to be insufficiently aware of its purpose or its conditions. He adopted his nominal value on the basis of its small area.
Lot 165 on EP1308 also has a small area and was valued by Mr Stack at $22,500. This figure suggests to me that the land had some potential use. He applied $7,500 nominal value to Lot 1 on RP 722352, which has an area of 11.67 ha and a similar figure to Lots 2 and 3 on RP 725940, which has a combined area of 37.33 ha. Mr Stack described this as low-lying and salt-affected land.
I am left in the position of having been presented with a valuation report by Mr Stack which is incomplete in its reasoning, but which was left largely intact following cross-examination. Such challenges as there were, were not sufficient to cause me to set aside Mr Stack's valuation as being a totally unhelpful document. Apart from the attack on Mr Stack's sale 5, for which he had a sensible response, there was nothing from the respondent's side that pointed to his individual parcel values being low. Indeed, his failure to take account of improvements and the worsement on the subject land indicates that his individual values could even be too high. Given my rejection of the respondent's view of the highest and best use of the subject land, I find myself in a position of having to either accept the gross realisation for the individual land parcels as identified by Mr Stack, or having no evidence upon which to draw a conclusion as to value. In the circumstances I accept Mr Stack's view that the gross realisation of the sale of the individual parcels of land would total $1,417,500. From that figure Mr Stack deducted a discount as follows:
" Gross Realisation  $1,417,500
           Less Selling Costs @ 5%  $70,875
           Net Realisation  $1,346,625
           Less Profit and risk allowance of 10%  $122,420
           Value in one line  $1,224,205   "

I understand that Mr Stack's view is that the state of the market at the relevant date was such that immediate sale of the nine parcels of the subject land separately would be improbable, therefore, the sale would be to one person who would, in due course, resell the individual lots. An issue of this type arose for consideration in Canberra Freeholds Ltd v. Queanbeyan Municipal Council (1973) 27 LGRA 134. Else-Mitchell J provided the following reasoning with respect to the treatment of the issue:
" The approach made by the defendant's valuers was in conformity with the accepted authority of judges of this Court over many years that a profit and risk factor should not be excluded simply because the resumed land had been previously subdivided: Closer Settlement Limited v. The Minister ((1942) 17 LGR 62); Best v. Housing Commission of New South Wales ((1949) 17 LGR 129); Nelson v. Housing Commission of New South Wales ((1962) 8 LGRA 408). These decisions are supported by the judgment of the High Court of Australia in Turner v. The Minister for Public Instruction ((1956) 95 CLR 245) and are not contrary to anything said by the Privy Council in Maori Trustee v. Ministry for Works ([1959] AC 1).
As I see the position, it is a question of fact for determination by the tribunal assessing compensation in the light of the circumstances of each resumption, whether one should assume the immediate sale of the entirety of the land resumed to one purchaser or the sale of individual subdivided lots to several purchasers; and according to whichever assumption is made it will usually be necessary to consider also how far the market price would be affected and to what extent any delay in the sale of all the sub-divided parcels might ensure." (at 136-137)

On my understanding of what His Honour had to say, Mr Stack's approach to the matter is consistent with principle. The actual allowances that he has made were not challenged as to quantum. I accept them – they appear to be reasonable. Indeed, it may be the case that dependent on the sale period envisaged, other allowances could have been taken into account. The subject land is zoned "Noxious and Hazardous Industry" under the relevant town plan. Mr Stack proceeded on the basis that rezoning, assuming it is needed to allow rural homesite uses, would be provided as a matter of course and without cost.
Given the state of the evidence, I can draw no other conclusion than that the appeal should be allowed and that the valuation of the subject land ought to be determined in the amount of One Million Two Hundred and Twenty-five Thousand Dollars ($1,225,000).

RP SCOTT
MEMBER OF THE LAND COURT

[2002] QLC 19

8 March 2002